Gold in Your Portfolio: How Much and Why

Gold can add stability to a portfolio because its price often holds up when shares or the rupee are under pressure, but it pays no interest or dividends and can stay flat for years. Many planners suggest keeping a modest share, often in the range of 5% to 15% of investments, rather than a large one. For investment, gold ETFs and gold mutual funds are usually cheaper and simpler than jewellery.

Gold has a special place in Indian households: as savings, as a gift, and as security for hard times. This lesson separates gold as an investment from gold as jewellery, because the two behave very differently with your money.

What role does gold play in a portfolio?

• A partial hedge: gold has often held its value during inflation scares, market crashes and periods when the rupee weakens. Because it doesn't move in step with shares, it can soften a portfolio's falls, as the lesson on diversification explains.
• Easy to sell: gold is widely traded and accepted everywhere.
• No income: unlike shares, bonds or property, gold produces no profits, interest or rent. Its return comes only from price changes.
• Long flat stretches: gold's price can go sideways or fall for several years, even when other assets are doing well. Holding too much of it means missing that growth.

So gold is best seen as insurance for a portfolio, not its engine. A small share can help; a large share mostly adds opportunity cost.

What does buying gold jewellery really cost?

Jewellery carries costs that you rarely get back when you sell. Here is what a hypothetical piece containing ₹1,00,000 worth of gold might cost, with 15% making charges:

If the gold price doesn't move, selling soon after would return roughly ₹1,00,000 or less, a loss of more than ₹18,000. The gold price has to rise by about 18% just to break even. Stones set in jewellery usually add little resale value, unless they are valuable gems.

That doesn't make jewellery a bad purchase: it is something you wear and enjoy. But it is consumption with some value retained, not an efficient investment.

What are the ways to invest in gold?

Option	How it works	Points to note
Jewellery	Physical gold you wear	Making charges, GST and storage risk. Buy only hallmarked pieces.
Coins and bars	Physical gold from banks or jewellers	Lower making charges than jewellery, but GST, a premium and storage costs apply. Banks usually don't buy coins back.
Gold ETFs	Exchange-traded funds that hold physical gold; bought and sold on the stock exchange like shares	Need a demat and trading account. Small yearly expense ratio plus brokerage. No purity or storage worries.
Gold mutual funds	Funds that invest in gold ETFs; bought from the fund house	No demat needed and allow monthly investing. Slightly higher total costs than holding an ETF directly.
Sovereign Gold Bonds (SGBs)	Government securities linked to the gold price, paying 2.5% a year interest	No new issues since February 2024. Existing bonds can be bought and sold on the stock exchanges, though trading can be thin.
Digital gold apps	Platforms selling small amounts of gold stored by a vault company	Not regulated by SEBI or the RBI. SEBI has cautioned investors about such products.
Gold futures	Derivative contracts on commodity exchanges	Leveraged and speculative. Not suitable as a long-term holding for beginners.

As of October 2026. The government has not issued new Sovereign Gold Bonds since the February 2024 tranche and has indicated no plans to resume them. SEBI cautioned investors about unregulated digital gold products on 8 November 2025. Check the latest on the RBI website and the SEBI website.

How is gold taxed?

Gains from selling gold are capital gains. The holding period that makes a gain "long-term" differs by form:

Form	Long-term after	Long-term gains taxed at	Short-term gains taxed at
Physical gold (jewellery, coins, bars)	More than 24 months	12.5%, without indexation	Your slab rate
Gold ETFs	More than 12 months	12.5%, without indexation	Your slab rate
Gold mutual funds	More than 24 months	12.5%, without indexation	Your slab rate
Sovereign Gold Bonds	Interest of 2.5% a year is taxed at your slab rate. Gains on redemption at maturity are tax-free for individuals who bought at the original issue and held to maturity; other gains, including from selling on the exchange, are taxed as capital gains.

As of October 2026. These rates apply to sales from 23 July 2024 onwards, plus surcharge and cess where applicable. Tax rules change with budgets, so check the current position on the Income Tax Department website.

How do you buy physical gold safely?

• Insist on a hallmark. Hallmarking is mandatory for gold jewellery sold by jewellers in most of India. A valid hallmark includes the BIS logo, the purity grade (for example 22K916) and a six-digit alphanumeric HUID code, which you can verify in the government's BIS Care app.
• Ask for an itemised bill showing the gold weight, purity, gold rate, making charges, stone charges and GST. Keep it: it proves your cost for tax and helps on resale.
• Compare making charges across jewellers; they vary widely by design and shop.
• Understand locker cover. Under RBI rules, a bank's liability for loss from a locker due to fire, theft, building collapse or fraud by its staff is capped at 100 times the yearly locker rent. Loss from natural disasters is generally not covered. Consider home insurance that covers jewellery if you hold a lot.

How much gold should you hold?

There is no single right answer. A common guideline among planners is around 5% to 15% of your investments, with about 10% often used as a starting point. Gold already held as jewellery counts towards this if you would be willing to sell it, but many families never would, so it may be more realistic to leave it out.

Within that share, a sensible pattern for most investors is to hold investment gold through ETFs or gold funds, buy it gradually rather than all at once, and rebalance when gold's share drifts far from your target. As the lesson on valuation notes, gold earns no income, so buying heavily after a sharp rise is a bet on price alone.

Gold in one paragraph

Gold is a useful supporting player: it tends to steady a portfolio in bad times and is easy to sell. It is not a growth engine, earns nothing while you hold it, and jewellery carries heavy costs you won't get back. Hold a modest share, in a low-cost form, as part of a diversified plan. That completes Money Basics. The next module, Investing Basics, builds on these habits to explain what investing is and how risk and return are linked. See the full course outline.

Quick quiz

3 quick questions on this lesson. Choose your answers, then press Check answers.

1. You buy jewellery containing ₹1,00,000 of gold, with 15% making charges and 3% GST. Roughly how much do you pay?

Choose one answer.

₹1,00,000 ₹1,03,000 ₹1,15,000 ₹1,18,450

Show answer

Answer: ₹1,18,450. ₹1,00,000 + ₹15,000 making charges = ₹1,15,000, plus 3% GST of ₹3,450, gives ₹1,18,450.

2. As of October 2026, after how long are gains on gold ETFs treated as long-term?

Choose one answer.

More than 12 months More than 24 months More than 36 months They are always short-term

Show answer

Answer: More than 12 months. Gold ETFs are long-term after more than 12 months, while physical gold and gold mutual funds need more than 24 months.

3. Digital gold sold through apps is regulated by SEBI in the same way as gold ETFs.

True or false?

True False

Show answer

Answer: False. Digital gold products are not regulated by SEBI or the RBI, and SEBI has cautioned investors about them. Gold ETFs are SEBI-regulated mutual fund products.